Limited and unlimited liability

Limited liability

Limited liability means that the business owner or owners are only responsible for business debts up to the value of their financial investment in the business. This means that a creditor can only take assets or finances belonging to the company. Limited liability only applies to certain types of business, such as private limited companies.

Unlimited liability

Unlimited liability means that the business owner or owners are personally responsible for all of the debts of the business, no matter what the value.

The main difference between unlimited and limited liability is the level of risk that a business is willing to take. Having unlimited liability is a bigger risk for any business than having limited liability.